Labour’s promise to save the high street by increasing rates bills of bigger businesses will misfire for UK economy – London Business News | Londonlovesbusiness.com

The Government is rushing through Parliament new business rates legislation that has not been properly thought out and will potentially add millions of pounds onto the rates bills of UK Plc- doing little to help grow the economy.”  says John Webber, Head of Business Rates at Colliers, the property consultancy.

Research from Colliers show how the plans will also increase the burden on the bigger retailers and hospitality businesses, therefore discouraging employment and further investment in the sector, countering the Government’s claims “to be saving the high street”.

Webber’s comments come on the back of the government’s recent introduction of draft legislation to the Commons enabling the introduction of permanently lower business rates for high street businesses from 2026, which it says would be “funded by a tax rise for the very largest business properties, such as online sales warehouses”. The proposal is for a higher rate (or multiplier) to be payable by businesses occupying property with a rateable value over £500,000.

According to James Murray, Exchequer Secretary to the Treasury, the move would give the retail, hospitality, and leisure sectors “much-needed certainty and support” thanks to a higher tax on the most valuable 1% of business properties.

The Budget meanwhile slashed business rates relief for retail, hospitality and leisure from 75% to 40%, effective for a year from April 2025.

What this would mean in practice

Colliers has investigated the impact of this proposed legislation, which if introduced, would enable the Government to increase the higher multiplier (the rate at which property businesses are taxed) by up to 10p in the pound on these businesses with RVs above £500,000.

Colliers estimates that should this occur, the office sector for example could see a huge £677 million added to its annual business rates tax bill and an extra £266 million could be added to the bills of large distribution warehouses.

The hypermarkets/ bigger supermarkets could also see a £228 million rise Other retail and hotel businesses will not be exempt. Larger shops could see rises of over £87.2 million, retail warehouses and foodstores by £37.5 million and 4-star hotels and major chains an extra £58.6 million.

Colliers estimates that Tesco alone could see in excess of £80million extra on its overall rates bill and Sainsbury and Asda in excess of £60 million each.

Other key sectors with large occupiers would also be hit including large industrial/ manufacturing which could see an £84.5million increase and factories, workshops and warehouses (including bakeries & dairies) many of whom who supply or support high street businesses, which could see an extra £81.9 million on their business rates bills.

“And the fall out will impact other sectors that the government might not have thought about,” says Webber. “NHS Hospitals and clinics, for example could see an extra £78 million on their rates bills. Even local authority schools could see an extra £40 million at a time when many are having to cope with an influx of pupils from the private sector in the fall out from Labour’s VAT and business rates policies against private schools.”

And that’s not all – as Webber points out, “Actual business rates rises may well be even higher given we will also see a Revaluation in 2026 which is expected to result in increases in rateable values across the sectors, including for retail and hospitality – which could well go up by an extra 15 to 20%. Together with the higher multiplier, this will be carnage.”

He added, “The Government has not thought this policy through properly. Hammering the bigger businesses across the UK with such rates rises, on top of all the other costs inflicted on them in the Budget will not stimulate growth and investment. Rather the opposite.”

“And putting further costs on the bigger retailers and hospitality businesses who actually create the employment opportunities in the sector will just misfire. There will be no incentives to expand, and increased costs will most likely be put through to the consumer. Jobs may be cut. I fail to see how the high street will benefit.”

Webber is also concerned about how quickly this legislation is being rushed through Parliament. “The second reading of the bill was at the end of November, with the third reading expected shortly.

“The Treasury is rushing this through without even having the discussions with industry that they promised at the time of the Budget. They are clearly doing this to get their taxation of private schools in place by January, ignoring the fact that they have not thought through the implications of their wider business rates reforms.”

“We are also concerned about the paragraph in the bill which provides a power for the Treasury to define “the meaning of qualifying retail, hospitality and leisure hereditament”. This means we won’t know exactly what properties will be included in the new legislation. It’s preposterous that the Government is redefining the sector without any consultation with the industry. “

“Finally, whilst we don’t dispute that smaller high street shops should see a lower multiplier than they are currently seeing, particularly if reliefs are to be cut from 75% to 40% in 2025, what we had hoped to see from Labour’s business rates policy was a lower multiplier across the board, rebasing it to something businesses could afford and which would stimulate growth and investment. And to simplify an already over complicated system.

Instead by introducing additional multipliers we have an even more confused system and one where some sectors could well be seeing a tax rate of nearer 60p in the pound rather than 50p. This is not good news for UK Plc. It is not good news for investment and growth. Nor is it good news for the high street.  We are responding to the Treasury accordingly.”